Facebook: risks outweigh possible profit

Meta Platforms, stock, Facebook: risks outweigh possible profit

Since the beginning of 2021, Facebook shares (FB) have risen by more than 18%. This was also facilitated by the good figures for the first quarter of this year. The social network turned out to be one of the few technology companies whose financial report did not disappoint investors, but the potential for further growth in quotations looks limited. The shares are traded at Forward P/E - 26x. Given the dynamics of quotations, enthusiasts may have the opportunity to purchase FB at more attractive prices.

Instagram Facebook's main risks have been known for a long time: Apple's privacy policy update (iOS 14), which will negatively affect marketing campaigns on Facebook and Instagram, as well as competition from other social networks. In addition, it is worth highlighting the weak growth in the number of users in the United States (they bring the most revenue) and the expected decline in margins due to the high costs of improving the platform in 2021 to $70-73 billion. All this can have a negative impact on EPS.

Let's take a closer look at the growth of DAU (Daily Active Users): at the end of the first quarter, the indicator increased by 8% y/y, to $1.88 billion. This happened due to the connection of new users in Asia and the” rest of the World". At the same time, in the United States and Europe, there is stagnation: for example, if in the second quarter of 2020, the DAU in the United States and Canada was 198 million, then in the first quarter of 2021 – 195 million. As already mentioned, residents of these regions are monetized at the highest rate: Americans account for 10% of the total customer base and about 47% of all income.

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Cryptocurrency: Bitcoin Whales are Awakening
Bitcoin/USD, cryptocurrency, Cryptocurrency: Bitcoin Whales are Awakening The battle of bitcoin for the $46 thousand level continues: after another approach to important support at the beginning of the week, sellers took a tactical retreat and began preparing another assault. The chances of fixing quotes below this mark remain extremely high, since there are still no serious positive information flows, as a result of which there is no influx of enthusiastic buyers.The most interesting news at the moment is the awakening of bitcoin wallets that have been inactive in recent years. On December 16, after 8.4 years of hibernation, an address with 225 BTC ($10.8 million) woke up, on December 19 - an address with 235 BTC ($11.1 million) and on December 21 - an address with 321 BTC ($15.1 million). This gave rise to the theory that unknown people were able to find a vulnerability in old wallets, thanks to which they picked up a cipher for the generated mnemonic phrases (seed phrase). It remains to be guessed where the coins that are being sent to other addresses will eventually end up.The reduction in the premium on CME futures adds to the pessimism. The situation when derivative contracts are traded at a premium to spot prices is called contango. It is considered normal if it is about 0.5-2%. Now it can be noticed that the average premium values have been steadily declining since October and can go into negative territory at such a pace. This dynamic indicates a lack of confidence in institutional investors in the medium term BTC.
Dec 22, 2021 Read
Cryptocurrency: the Fed's decision doesn't change much
Bitcoin/USD, cryptocurrency, Cryptocurrency: the Fed\'s decision doesn\'t change much BTC reacted positively to the recent Fed meeting, where it was announced the decision to accelerate the pace of reducing bond repurchases (from $15 billion to $30 billion), and expectations were expressed about a threefold increase in the interest rate in 2021. Investors were encouraged by the fact that the officials' words coincided with expectations, but it's hard to believe in the long-term positive sentiment. Apparently, as it often happens, market participants will need several days to digest the information received and realize the fact that the reduction of programs in the name of combating inflation, which is no longer perceived as a temporary phenomenon, should deprive the market of its former liquidity.For a BTC reversal, it is necessary to confidently gain a foothold above the $50 thousand level, so there is still a possibility of continued growth. However, the idea of a further hike towards the lows of the fourth of December and the removal of stops from the end of September looks very attractive - around the $40 thousand mark. Moreover, some serious positive news has not yet been delivered, which means that marketers are not in a hurry to disperse quotes yet. There is a feeling that the arrival of new large algorithmic funds, like Alameda, has changed the landscape of the crypto market: the movements have become less sweeping and now coins can be trampled near strong levels for almost weeks before going to the intended goal.
Dec 17, 2021 Read
Yesterday was rich in macro statistics
Dow Jones, index, NASDAQ 100, index, S&P 500, index, Brent Crude Oil, commodities, Yesterday was rich in macro statistics Yesterday, the yields of ten-year US treasury securities at the moment exceeded the level of 1.69% per annum, but at the end of the day they fell by about 3 bps to 1.63% per annum. Today is a day off in the US, and yields remain at the same levels. US stock indexes closed mixed yesterday, tending to growth – the S&P500 rose by 0.23%, the Dow Jones fell by 0.03%, and the NASDAQ added 0.44%.October data showed an unexpected decline in orders of durable goods in the United States. So, against the expected growth of 0.2% mom, the indicator decreased by 0.5% mom. At the same time, this decrease is mainly due to a drop in transport orders, and the indicator, excluding these components, increased by 0.5% mom. Wholesale inventories in October, unlike orders for durable goods, grew stronger than the consensus forecast – by 2.2% mom versus the expected growth of 1.0 m/m. Yesterday, data on the Core PCE price index, which is targeted by the Fed, was also published. After the September growth of 3.6% YoY, the indicator in October increased by 4.1% YoY. Such data coincided with the Bloomberg consensus forecast, and did not surprise investors – the market has to wait for more up-to-date price statistics for November. Yesterday, the weekly data on the number of applications for unemployment benefits in the United States surprised the most – the number of applicants immediately decreased by 70 thousand to 199 thousand. Thus, the weekly number of requests has become the lowest since 1969. Probably, such data are explained by errors in the correction for seasonality in connection with Thanksgiving, and next week the number of applications for benefits may return to more familiar levels of about 260 thousand applicants. In any case, investors will receive details on the situation on the US labor market next week, when the November labor statistics are expected to be published.On Wednesday, the minutes of the last Fed meeting were also published, which did not surprise the market in general. It emphasizes that the current inflation is still mainly due to temporary factors, which, however, turned out to be more stable than expected. In any case, Fed members agree that the time has come to wind down the asset purchase program. At the same time, a number of participants in the meeting called for a higher rate of reduction in asset repurchase in order to be ready for an earlier rate increase. Yesterday, the same opinion was expressed by the head of the Federal Reserve Bank of San Francisco, Mary Daly. However, before such decisions, she would like to evaluate the statistics of the coming months. As for the expectations on the rate, M. Daly stated quite harshly yesterday that she would not be surprised by a rate increase twice in 2022. The tightening of monetary policy in the US is getting closer, and the market will especially monitor the November statistics on prices and the labor market.Yesterday, Brent crude futures fell by 0.1% to $82.25/bbl. against the background of a strengthening dollar. The negative in the oil market was moderately strengthened by weekly data on reserves from the US Department of Energy. They indicated an increase in oil reserves by 1.02 million barrels. against their expected decline of 0.48 million barrels. However, the stocks of petroleum products decreased, which limited the negative from yesterday's statistics. Today, Brent futures are growing weakly and are trading around $82.35/bbl. Yesterday it was reported that OPEC+ in response to US intervention may decide not to increase production at the next meeting. At the same time, a number of sources later denied such plans. Uncertainty about the actions of the cartel remains high, and investors have to wait for the main OPEC+ meeting on December 2. In the meantime, we continue to expect Brent futures to remain at levels above $80/bbl in the coming days.
Nov 25, 2021 Read
PMI and the index for the service sector have moved to growth
Dow Jones, index, NASDAQ 100, index, S&P 500, index, FTSE 100, index, PMI and the index for the service sector have moved to growth Yesterday, the yields of ten-year US Treasury securities rose by about 4 bps to 1.67% per annum. Today they are declining and are about 1.64% per annum. US stock indexes closed mixed yesterday – the S&P500 rose 0.17%, the Dow Jones added 0.55%, and the NASDAQ lost 0.50%.On Tuesday, the US and EU published November business activity indices from Markit. In the EU, both the PMI and the index for the service sector unexpectedly moved to growth. Nevertheless, the components of the indices indicated a record increase in both costs and selling prices, which indicates an increasing price pressure. The data on the November Markit PMI indices in the US turned out to be slightly worse – the manufacturing index rose by 0.7 p to 59.1 p, fully coinciding with the Bloomberg consensus forecast, but the index for the services sector fell by 1.7 p to 57.0 p. against the expected growth to 59 p . Despite recent reports of a certain improvement in the situation on the supply side, the PMI indices indicated an increase in costs to new highs. As a result, against the background of high demand, manufacturers continued to shift costs to consumers, and the component of selling prices remained at record levels last month. Yesterday's data increased the likelihood of further acceleration of inflation in the United States, which increased market fears of an imminent tightening of monetary policy.Today promises to be a busy day - tomorrow is Thanksgiving Day in the United States, in connection with which most of the events were postponed to Wednesday. In particular, October data on durable goods orders, the Core PCE price index, which the Fed uses when making decisions, as well as weekly statistics on the number of applications for unemployment benefits will be published in the United States today. Wednesday will be marked by the publication of the minutes of the last Fed meeting, which, however, is unlikely to significantly surprise the market. Probably, the "minutes" will be devoted to the process of winding down the asset purchase program, and more important issues for the market with the timing of the rate increase will not be disclosed. Now the latest data for November will be more fundamental for the prospects of the PREP – next week the market will evaluate labor statistics, and a week later inflation data will be released.Yesterday, as reported, it was announced the beginning of the sale of oil from the reserves of the United States and a number of other countries. However, after such news, oil quotes moved to growth, and Brent crude futures immediately rose by 3.3% to $82.31/bbl at the end of the day. Probably, investors were afraid of more significant volumes of additional oil supply than was announced yesterday (70-80 million barrels. for several months). Today, Brent futures are growing by 0.10% and are trading around $82.4/bbl. The positive oil market is not added by the data published yesterday on stocks in the United States for the week from the American Petroleum Institute (API). Thus, they indicated an increase in oil reserves by 2.31 million barrels, while they were expected to decrease by 0.95 million barrels. Today, the market will evaluate official data from the US Department of Energy - if they also show an increase in reserves, then oil quotes may return to decline. Further dynamics in the oil market will largely depend on OPEC+ plans, but for now Brent futures have the potential to gain a foothold above $80/bbl.
Nov 24, 2021 Read
Monday, November 23, 2021, on the world market was rather negative
Dow Jones, index, NASDAQ 100, index, S&P 500, index, Brent Crude Oil, commodities, Monday, November 23, 2021, on the world market was rather negative Yesterday, the yields of ten-year US Treasury securities rose immediately by 7.7 bps to 1.62% per annum. Today they are slightly declining and are about 1.61% per annum. US stock indexes closed mixed yesterday, tending to decline – the S&P500 fell by 0.32%, the Dow Jones added 0.05%, and the NASDAQ immediately lost 1.26%.The epidemiological situation is deteriorating not only in the EU, but also in the US, which puts pressure on market sentiment. However, if plans to tighten restrictions are reported in Europe, then in the United States they announced that there are no plans to introduce new lockdowns. Of the important events, it is worth noting yesterday's statements by Joe Biden about the appointment of Jerome Powell as head of the Fed for a second term. On the one hand, the preservation of the current leadership of the regulator reassured investors who feared increased uncertainty in the Fed's actions. However, on the other hand, now J. Powell can begin to adhere to a tougher position without fear for his appointment to a new term. A number of Fed officials have recently intensified their calls for an earlier tightening of monetary policy, primarily to accelerate the pace of curtailing the asset purchase program. Against this background, the market will especially monitor the upcoming statements of the head of the American regulator, fearing a tightening of his rhetoric.As for macro statistics, yesterday passed without the publication of important data for the market. The November consumer confidence index published yesterday in the EU fell to -6.8 p. against the expected decline to -5.5 p. Such data primarily reflect the effect of the deterioration of the epidemiological situation in Europe, and the market was not particularly surprised by the statistics from the EU. Yesterday's data from the US, on the contrary, came out more positive. Thus, October home sales in the secondary market increased by 0.8% mom against the expected decline of 1.4% mom. Today, the market will focus on the publication of November business activity indices from Markit in the US and the EU. In our opinion, the components that reflect supply-side problems will deserve special attention. If they continue to deteriorate, the November inflation may again unpleasantly surprise the market. In such a scenario, the newly appointed head of the Fed may, indeed, begin to adhere to a tougher position, which will negatively affect risky assets. However, a number of sources have recently reported some improvement in the situation on the supply side. If we see a reflection of these processes in today's data, then fears of an imminent tightening of monetary policy in the market may moderate.Yesterday, Brent crude futures rose 1% to $79.70/bbl. The growth of quotations was supported by reports that OPEC+ may adjust down its plans to increase production against the background of oil sales from the reserves of a number of countries and epidemiological uncertainty. However, the OPEC+ meeting is due to take place only next week, and so far the potential for further growth in Brent futures is limited. They are down 0.55% this morning and are trading around $79.25/bbl. This night, the US will publish traditional data on oil reserves for the week from the American Petroleum Institute (API). Nevertheless, today investors will rather monitor the situation with the sale of oil reserves. It is reported that a coordinated sale of oil to the United States and a number of other countries may be officially announced today. In many ways, the market already takes into account such a scenario, but Brent futures today can nevertheless show a moderate decline even against the background of the possibility of a weaker increase in production from OPEC+.
Nov 23, 2021 Read
GBP/USD forecast: Can the pair bounce back to 1.40
GBP/USD, currency, FTSE 100, index, GBP/USD forecast: Can the pair bounce back to 1.40 The British pound (GBP) to the US dollar (USD) fell sharply when the pandemic broke out, reaching a low of 1.1400 in mid-March 2020. The currency pair recovered and grew steadily during the rest of 2020 and in 2021, reaching a three-year high of 1.4215 last May.But the pair could not keep the profit and has been declining since then.This article discusses the key drivers of the pair and the latest forecasts of analysts for the GBP/USD pair.The recovery of the UK economy, although strong, is not enough to raise the pound sterlingThe pound had an optimistic start to the year: the country's economy grew thanks to a well-thought-out vaccination program against COVID-19 in the UK.Optimism about the UK economy grew even during the first three months of 2021, when restrictions were in effect in the UK.In the period from January to March, the UK economy performed better than economists and the Bank of England expected. UK GDP declined by 1.6% on a quarterly basis, while in February the Bank of England expected a reduction of 4%.The resumption of the economy in the second quarter provided an acceleration of growth. According to the Office for National Statistics, GDP grew by 4.8% in the period from April to June. This is a solid figure that shows that the UK economy is on the mend. Nevertheless, it was slightly below the level of 5%, which the head of the Bank of England, Andrew Bailey, spoke about on August 4 at the last meeting of the Bank of England. As a result of these figures, the pound fell.Thanks to the rapid vaccination program, the UK economic recovery was gaining momentum. But since mid-June, the number of COVID-19 infections has started to rise again, as a more contagious variant of the coronavirus, the Delta strain, has spread rapidly across the country. Despite the fact that there were no new lockdowns in the UK, many enterprises faced staffing problems due to the huge number of people who were told to self-isolate by the national health system application.Concerns about the prospects for the UK economy have recently affected the demand for the pound. But it is worth noting that these fears could be exaggerated, because retail sales grew at the fastest pace in seven years. But the PMI data fell more than expected, from 62.4 in June to 59.6 in July, the lowest value since March.UK inflation continues to riseInflation in the UK is also rising. The combination of rising material costs and fuel prices, as well as a shortage of labor, led to an increase in consumer prices. In June, the consumer price index rose to 2.5%. But in July, this indicator fell more than expected, to 2%. However, the Bank of England still expects inflation to rise to 4% by the end of the year, so some analysts believe that an increase in interest rates may occur sooner rather than later.Ian Stewart, chief economist at Deloitte, said: "If there is not another serious wave of COVID-19 diseases in the winter, and the state of the economy is in line with the forecasts of the Bank of England, then the first rate hike is likely to occur in the spring or early summer of next year."Other analysts believe that the Bank of England may start raising interest rates at the end of 2022. A Reuters poll shows that economists generally expect the central bank to start raising rates in 2023.In general, the UK economy has recovered confidently from the pandemic, and the growth rate remains high, even despite its slight slowdown. But the recovery in the UK was less impressive than in the US, which to some extent explains the weakness of the GBP/USD.The issue of tightening the Fed's monetary policy contributes to the growth of the US dollarThe US also benefited from a strong vaccination program, loosening of isolation bans and strong economic growth in the first half of 2021. Inflation was a particularly hot topic. Consumer prices rose to 5.4% in June, which is higher than in the UK.While the Federal Reserve (Fed) insisted that the increase in inflation was temporary, the US central bank made an unexpected hawkish turn, and this move suggests that two interest rate hikes can be expected as early as 2023, and not in 2024, as previously expected.This is a key moment for the GBP/USD pair, when the pair began a downtrend in mid-June.The market is watching the Fed for clues about the timing of measures to reduce monetary policy.The latest minutes of the Federal Open Market Committee (FOMC) showed that the Fed is increasingly agreeing with the idea of tightening monetary policy, and the bond purchase program may be reduced before the end of the year, which supports the US dollar.Now all attention is focused on the symposium in Jackson Hole, which will be held this week. Federal Reserve Chairman Jerome Powell may give further guidance on the timing of the Fed's next step to reduce bond purchases. But the fact that the Economic Forum was transformed into an online event at the last minute hints at further actions. Due to the increase in the number of cases of COVID, the Fed may exercise caution and wait for additional data to appear in the fall. As a result, the GBP/USD pair has grown in recent trading sessions, returning to 1.3700.GBP/USD: prospectsThe GBP/USD exchange rate started this year at 1.3500, rising to a maximum of 1.4215 at the end of May. Since then, the pair has been trending downward, reaching a five-month low of 1.3560 in July.The pair is currently trading below its 50 and 200-day simple Moving Averages (SMA) on the daily chart. The price fluctuates below the multi-month descending trend line. And this is an already formed bearish trend. The Relative Strength Index (RSI), which measures the oversold or overbought nature of an asset, gives mixed signals. He is still in bear territory.Sellers will need to break through the support at 1.3600, which is the minimum of August, and then 1.3560, the minimum of July. Such a move could open the way to the 200-week moving average of 1.3146.The prospects and trend of the GBP/USD pair largely depend on what will happen later this week at the symposium in Jackson Hole on the topic "Macroeconomic policy in an uneven economy". Federal Reserve Chairman Jerome Powell will deliver a speech on Friday.Some analysts expect that Powell will not give specifics about the time of reducing bond purchases in order to maintain flexibility. This can help reduce the demand for the dollar and raise the pound against the US dollar.Ian Lyngen and Benjamin Jeffrey of BMO Capital Markets said: "Investors are waiting for any information about the timing of the Fed's taping announcement, although we suspect that the chairman will leave enough room for ambiguity to provide flexibility, as concerns about the latest wave of the pandemic grow."Patrick Reed, co-founder of Adamis Principle, a trading training consulting company, believes that the Fed will postpone action until next year. He said:"The pound (GBP/USD) is really at the mercy of the Fed and the new taping plan in the fourth quarter… I really think that the Fed will not act this Friday, because the impact of the "Delta" option is worse than the market thinks – from an economic point of view. But I believe that the tightening of monetary policy will occur in the first quarter of 2022, so the pound (GBP/USD) will fluctuate in the range between 1.3580 and 1.4240, and by the first quarter of 2022 it will fall to 1.31."Meanwhile, Goldman Sachs analysts have increased the probability of taping in November compared to December. The investment bank expects the Fed to reduce purchases by $15 billion at the November and subsequent meetings. Goldmans estimates the probability of an official announcement of taping in November at 45% compared to 25%, while reducing the probability of December to 35% from 55%.While the strengthening of the prospects for tightening monetary policy supports the higher value of the US dollar, the Goldman Sachs forecast for the GBP/USD pair indicates a weaker US dollar in the medium term. Analysts believe that the GBP/USD pair will trade at 1.41 in three months and 1.45 in six months. The key level will be 1.44.In his analysis of GBP/USD, David Madden, market analyst at Equiti Capital, also noted that the Fed's next move will be a key factor determining the dynamics of the currency pair:"The GBP/USD pair has been growing for the past 18 months, but recently it has pulled back a little amid talk that the Fed may reduce its bond-buying scheme at the end of this year.Despite the fact that the UK economic recovery has been impressive, the same is true in the US, and it seems that the Fed is ahead of the Bank of England on the path of tightening monetary policy. This may limit the bullish growth of the pound. By the end of the year, the GBP/USD pair may reach the level of 1.4500."As for the more distant future, the pair's prospects after 2021 remain optimistic. The Wallet Investor website says that the GBP/USD exchange rate will rise in the next 12 months. In its annual forecast for GBP/USD, the service indicates that the pair may close August 2021 at the level of 1.3872. The long-term five-year forecast for GBP/USD predicts that the exchange rate will continue to rise to 1.4850.
Aug 27, 2021 Read
EUR/USD forecast: dependence on the ECB, the Fed and the Delta strain
EUR/USD, currency, EUR/USD forecast: dependence on the ECB, the Fed and the Delta strain While the currencies of the US and the European Union are strong and stable, the US dollar is also well known as a safe haven currency.The dollar is moving back to expectations regarding market risk: it grows when risk appetites are low, and falls against the background of growing appetites.Both the US and the eurozone are among the three largest economies in the world, while Europe lags behind the US and China. According to Statista, the EUR/USD pair is included in the category of majors in the Forex market, and it became the most traded currency pair in the world in 2020 by a share of the total number of transactions.The current situation for EUR/USDThe European currency remains weak against its American rival, having fallen by 4.46% since the beginning of the year and is struggling to gain momentum. On January 6, the pair reached a one-year high at 1.23495, followed by a series of lower highs and lower lows, which led EUR/USD to fall to 1.17041 on March 31.The pair partially recovered its losses, and then, within three days after the US Federal Reserve meeting on June 15, fell by 2.18% to the next low of 1.18471. Since then, the EUR/USD rate has continued to decline, currently trading at 1.17383, the lowest level since April.EUR/USD Drivers: US Federal Reserve, ECB, Delta strainThe key factors influencing the dynamics of the EUR/USD pair are the actions of the US Federal Reserve System and the European Central Bank (ECB), as well as how these two central banks form monetary policy.When the global pandemic hit the global economy, both central banks tightened policy, cutting interest rates to record lows and increasing bond-buying programs to unprecedented amounts.However, as US inflation rises, reaching a 13-year high of 5.4% in June and July, an interest rate hike may come sooner than expected. In June of this year, a dot chart of the US Federal Reserve showed that more members are now in favor of an interest rate increase by 2023 than previously expected, which led to a 1.96% increase in the US dollar index just three days after the release of this announcement.In addition to raising interest rates, there is a growing expectation that the Fed will begin to reduce its $120 billion bond-buying program. The recently published minutes of the Fed's July meeting showed that the US central bank may begin to wind down its monetary support as early as this year.But not all participants agree with the tightening of the policy. Some would prefer to slow down asset purchases "early next year" amid concerns about the labor market, which is still not reaching its pre-pandemic levels, and the rapidly spreading "Delta" option, which could " slow down the economic recovery."The curtailment of monetary stimulus may provoke a reluctance to take risks in the markets, as optimism is also strengthened thanks to the support of the Fed. Theoretically, the risk appetite will push the dollar up, because the US currency serves as a haven during market downturns, which, in turn, will push the EUR/USD down.After the publication of the Fed minutes, the dollar index rose to 93.729, the highest level since November last year. Problems related to the Delta strain can also support the dollar, as they strengthen the desire to abandon risk and help the dollar consolidate near the current year's maximum.ECB maintains blue positionOn the other side of the Atlantic, the European Central Bank's rhetoric was more dovish. In July, the bank updated its monetary policy recommendations, saying that an increase in interest rates should not be expected until the 2% inflation target is observed for a long period of time.The previous position was that an interest rate increase would be possible when "the forecast for inflation is reliably at a level close enough to 2%, although below it within the forecast horizon." Earlier this month, the bank also presented a new strategic review, in which the inflation target was changed from "below, but close to 2%" to "symmetrically 2%". This is the first change in strategy in almost two decades.During the press conference following the meeting, Christian Lagarde stressed that the September forecasts may be more indicative of the prospects. As in the case of its American counterpart, the ECB expressed concern about the Delta strain, emphasizing the uncertainty it carries.The reaction of EUR/USD to the ECB meeting was limited, the currency pair fell by 0.17% for the day.EUR/USD forecast: analysts' opinionsAccording to Ben Carter, an analyst of global capital markets at Validus Risk Management, the ECB's dovish rhetoric distinguishes it from the Fed and puts the European currency at a disadvantage compared to its American competitor."Due to numerous conversations that the Fed is starting to reduce purchases before the end of the year, the euro may struggle to gain any positions against the US dollar in the next few months, amid Christine Lagarde's comments that inflation has increased, but remains restrained," Carter said.Nevertheless, some analysts make positive forecasts for the EUR/USD pair and foresee a bullish price movement in the coming months, despite the overall strength of the US dollar, which may limit the upward movement of EUR/USD in the short term.On August 19, Rabobank analysts stressed that there are many factors that cause the desire to abandon risk, which contributes to the further growth of the US dollar. "In the G10 space, a lot of this is due to concerns about the Fed's taping," said Jane Foley of Rabobank."But we argue that there are other factors. The decrease in risk appetite is due to concerns about the Delta strain and, possibly, uncertainty about Afghanistan, " she added.Its forecast for EUR/USD for three to six months remains at the level of 1.1600.In a note to clients dated August 18, JP Morgan's global foreign exchange market research group lowered its forecasts for EUR/USD "due to the clearer prospects for monetary policy divergence by 1 cent in the future." The new target for the pair is 1.15 by mid-2022.EUR/USD: technical analysisAs the price recovers again from the lows around 1.1670, there is a consolidation above the 50-hour simple moving average (SMA). The 200-hour SMA is at 1.1730, which coincides with the consolidation area of the EUR/USD pair in the period from August 12 to 13. Important resistance levels are located around 1.1703 (August 19 high), 1.1730 (200-hour SMA), and 1.1754 (August 11 high).In a downtrend, support levels are set at 1.1665 (minimum on August 19), 1.1620 (minimum on September 25, 2020) and 1.1527 (minimum on September 10, 2020).
Aug 27, 2021 Read
Weekly forecast for EUR/USD: The Fed can no longer remain cautious
EUR/USD, currency, Weekly forecast for EUR/USD: The Fed can no longer remain cautious The EUR/USD pair ended the week with a modest increase, remaining below the level of 1.1800, not far from the low of 1.1705. The dominant bearish trend was interrupted on Wednesday after the release of US inflation data. The consumer price index was confirmed at 5.4% YoY, and the base indicator for the same period was lowered to 4.3%, as expected. The still-high numbers suggest that inflation may have peaked, and that the US Federal Reserve is right not to rush to reduce the pace of aid.Two bunnies of the FedThe producer price index in the country in the same month was 7.8% YoY compared to 7.3% earlier, which revived the tightening of speculation and stopped the fall of the dollar. Moreover, the number of weekly applications for unemployment fell to 375,000 in the first week of August after the impressive July report on the number of jobs in the non-agricultural sector. The US Federal Reserve system is trying to kill two birds with one stone: to achieve price stability and maximum sustainable employment.The central bank has tried to lower expectations for a reduction in monetary policy tightening, saying that rising inflation will rather be a temporary phenomenon, depending on moderate progress in the employment sector to maintain an ultra-loose monetary policy. Inflation may have finally peaked. This statement will either be confirmed or refuted by the figures of August. Meanwhile, the employment recovery is accelerating. The Fed will not be able to maintain its wait-and-see position if the August data turns out to be optimistic again.Europe's Bumpy RoadEuropean Central Bank remained silent for several weeks after European politicians promised to maintain a" constantly adaptive " monetary policy, as the pandemic could hinder the economic recovery.The ZEW survey showed that in August, the index of economic sentiment in Germany fell to 40.4 and to 42.7 in the European Union, which is much worse than expected. The consumer price index in Germany was confirmed at 3.8% YoY, and the wholesale price index rose by a modest 1.1% mom in July. The EU published data on industrial production for June, which unexpectedly fell by 0.3% mom. The positive aspect is that the trade balance of the European Union, seasonally adjusted, amounted to 12.4 billion euros.Summer depressionThere is a lull in the Forex market as a whole, as trading activity decreases in the summer. Low volatility is likely to continue in the coming days, while the macroeconomic calendar may present a number of surprises.On Friday, the US published a preliminary estimate of the August consumer sentiment index from the University of Michigan, which unexpectedly fell to 70.2, the lowest level in almost a decade, but this did not help the EUR/USD pair to grow.On Tuesday, the EU will publish data on gross domestic product for the 2nd quarter, and the US will publish data on retail sales for July, which, according to expectations, may decline by 0.2% mom. On Wednesday, the US Federal Reserve will publish the minutes of its last meeting.Technical forecast for the EUR/USD pairThe EUR/USD pair reached the bottom a couple of points above the March low of 1.1703, after which it rebounded slightly. On the weekly chart, the pair maintains a bearish position, and it needs to break below the 1.1700 price zone to confirm a sharper decline. At the specified time interval, the pair continues to develop below its 20-day simple moving average, which has partially lost its bearish strength. The longer moving averages converge around 1.1530, while technical indicators are heading down within negative levels, reflecting the dominance of bears.Technical data on the daily chart also shows that sellers retain control. The bearish 20-day simple moving average provides dynamic resistance at 1.1800, developing significantly below the longer ones that lack directional strength. The Momentum indicator remains below its midline, while the RSI is recovering from oversold values, which are currently around 45.A break below the level of 1.1700 may cause a downward movement to the area of 1.1600 / 40, and a further decline will open the way to 1.1520. Above 1.1800 there are resistance levels of 1.1840 and 1.1920, approaching the latter is likely to arouse interest from sellers.
Aug 16, 2021 Read
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